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Why Shares of RH Are Soaring Today

What happened

Shares of RH(NYSE:RH), a leading luxury retailer within the home furnishing industry, are soaring more than 25% as of 1:27 p.m. EST after the company released preliminary fourth-quarter results that indicate its business could be getting back on track.

So what

More specifically, adjusted net revenue is expected to reach $590 million compared to its previous guidance of $562 million to $592 million, and above analysts' estimates looking for $584.7 million. RH expects to generate adjusted earnings per share of $0.68 during the fourth quarter, which would check in at the high end of management guidance and would top analysts' estimates calling for $0.65 per share.

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For the full year, RH now expects adjusted net revenue to reach the high end of its guidance at $2.14 billion with adjusted gross margin to check in at roughly 32.8%. That will trickle down to RH's bottom line and total roughly $1.26 in adjusted earnings per share, toward the upper end of its full-year guidance range of $1.19 to $1.29 per share.

"As we exit fiscal 2016, we are now through the most uncertain stage of our transformation. As previously communicated, we have made several strategic investments and changes to our business model in fiscal 2016 that temporarily depressed financial results in the short term, and that we believe will strengthen our brand and position the business for accelerated growth in 2017 and beyond." said Gary Friedman, RH chairman and CEO, in a press release.

Now what

It's been a pretty brutal 18 months that sent RH's stock price plunging, thanks to excessive promotions, margin pressure from switching to a membership model, and the launch of RH Modern. This is obviously a breath of fresh air for long-term investors hoping management could turn things around. Now, while these preliminary results are reassuring, it's still critical for investors to tune in to the fourth-quarter conference call for more insight on its overall consumer environment and whether or not management sees any lingering headwinds. That said, these results are certainly a step in the right direction.

Author

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